Defra draft Water Bill opens up competition

Businesses in England could save £2bn under new plans unveiled today allowing them to "shop around" for their water and sewerage suppliers.

The proposal to improve competition in the water industry, is part of the draft Water Bill, published today for pre-legislative scrutiny by Parliament.

The Bill will also seek to slash red tape and drive innovation. However it is the move to open up the market, and allow companies to switch suppliers, that will attract most interest.

Evidence suggests that opening up the water market and allowing businesses to switch supplier could deliver benefits to the economy of £2bn over 30 years. In Scotland, after similar reforms were introduced, the public sector alone is set to save around £20m over the next three years.

The draft legislation will remove current regulations which act as a barrier to new entrants wishing to enter into the water and sewerage market. Currently, any new entrant needs to negotiate with up to 21 water companies before entering the market. Under the new Bill there will be no need to do this - Ofwat will instead set out standard terms and conditions for companies to follow. It will also encourage existing companies to look at offering alternative supplies and services.

This increased competition in the wholesale market will give water companies an incentive to come up with cheaper, more sustainable solutions to sourcing water, said Defra.

"This draft Bill will create a modern customer-focused water industry and for the first time all businesses and other organisations will be able to shop around for their water and sewerage suppliers," said Environment Secretary Caroline Spelman.

With water bills in England and Wales having risen steadily in recent years, the news was welcomed by Ofwat. "The reforms will help the country become better at valuing, managing and using our water," said CEO Regina Finn. "This Bill is good for the customer, the economy and the environment."

The reform plans will also make it easier for bulk water trading within the industry, allowing water companies to work more closely to find long-term solutions to water security issues. Meanwhile, developers will benefit from the extension of environmental permits to include water abstraction licensing and flood defence consents - reducing the red tape around environmental regulation.

"By slashing red tape we will stimulate a market for new water resources and incentivise more water recycling," added Spelman.

Businesses, charities and public organisations with multiple sites will also be able to receive just one combined water and sewerage bill for all their offices and buildings across England and Scotland.